Moody's revises oil/gas sector outlook to stable

AlexisFlynn

LONDON (MarketWatch) -- Moody's Investors Services Inc. has reappraised its outlook for the global oil and gas sector to stable from positive, citing the growing likelihood that a weaker macroeconomic environment and lower crude prices will crimp earnings growth in coming quarters.

In an outlook report published Monday, Moody's said it considers "fundamental credit conditions for the industry to be stable rather than positive." In addition to a decline in the oil price, the ratings agency also said the sector will continue to be affected by tight refining margins.

"We believe that weakening global macroeconomic conditions will lead to slower growth in oil consumption and an easing in current market tightness over the coming quarters, as Libyan production gradually comes back onto the market," said Senior Credit Officer Francois Lauras. "These factors could result in some softening in oil prices from recently high levels, with Brent averaging $112 per barrel to date in 2011."

Moody's warned it could even change its outlook to negative "if the global economic recovery goes into reverse and leads to a sudden and substantial deterioration in oil prices."

Although it said its central macroeconomic scenario remains one of "sluggish global economic recovery," the risk of the world economy going into recession has heightened recently.

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